Tuesday, January 4, 2011

Palm oil hits 33-month high in weather-driven rally

KUALA LUMPUR: Malaysian crude palm oil hit a fresh 33-month high on Tuesday, Jan 4 as part of a weather-driven rally in global vegetable oil markets.

Heavier-than-usual rains stalled harvesting in top producers Indonesia and Malaysia, and dry weather slowed soy plantings in South America, raising concern over tight supplies.

Prospects of shrinking supplies come as top Asian buyers such as China need to build inventories for Lunar New Year holidays in early February, which run for about 10 days.

"The palm oil market is pacing itself for more gains. The consensus is that in the first quarter prices will strengthen as adverse weather intensifies and demand grows," said a trader with a foreign commodities brokerage.

The benchmark March 2011 crude palm oil contract on Bursa Malaysia Derivatives rose 0.9 percent to 3,888 ringgit ($1,268.722) per tonne, after earlier going as high as 3,905 ringgit -- a level unseen since March 10, 2008.

A Goldman Sachs analyst said palm oil's price cycle may peak in the first half of 2011 as Asian buyers chase vegetable oil supplies that are shrinking due to adverse weather.

Crude oil hovered near its highest price levels in more than two years, which tends to support prices of vegetable oils in the bioethanol markets.

U.S. soyoil for January delivery rose 0.7 percent in Asian trading hours, with some traders still pricing in the impact of drier Argentine weather on soy yields.

But a forecast for improved weather in the South American country may trigger some selling pressure later on, regional traders in Asia said.

The most active Sept 2011 soyoil on China's Dalian Commodity Exchange rose 1.3 percent after a long holiday weekend.- Reuters

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